Alignment of the Nedap UV Order Fulfilment Process

109 Pages·2013·3 MB·English

2013
Alignment of the Nedap UV
Order Fulfilment Process
H.J.F. Arkink
[email protected]
7/18/2013
Colophon

Title: Alignment of the Nedap UV Order Fulfilment
Date: 18-7-2013
City: Weerselo
Pages: 78 (Excluding Appendices)
Appendices: 12 (28 Pages)
Status: Final
Author: Henri Johannes Franciscus
Student Number: s0151742
Contact Emailadress: [email protected]
Thesis Committee:
Nedap N.V.: Mr. P. Bolwerk
Operations Manager Nedap Light Controls
[email protected]

University of Twente: Dr. Ir. L.L.M. van der Wegen
Lecturer Faculty of Management and Governance
[email protected]
Ir. W. Bandsma
Lecturer Faculty of Management and Governance
[email protected]

Nedap N.V.
Department: Nedap Light Controls
Address: Parallelweg 2
Postal Code and City: 7141 DC Groenlo
Phone Number: [phone]
Website: www.nedap.com
University of Twente
Faculty: Management and Governance
Education: Industrial Engineering and Management
Specialisation Track: Production and Logistics Management
Address: Drienerlolaan 5
Postal Code and City: 7522NB Enschede
Phone Number: [phone]
Website: www.utwente.nl
© H.J.F. Arkink (2013) II
Acknowledgements

This thesis is the result of the graduation research for my Master study Industrial Engineering and
Management at the University of Twente. The thesis is conducted at Nedap N.V. and aims for an
improved and controlled order fulfilment process at its Light Controls department. I am grateful for
the opportunity the business unit Nedap Light Control gave me to execute this graduation research in
their inspiring company. Although the last two months of this research have been tough, it has been
a very inspiring, challenging and valuable learning experience for me. I could not have written this
thesis without the support of many people. Many ideas in this thesis have evolved from formal and
informal discussions and interactions with colleagues and friends. Warm thanks are extended to all
who have been involved in this thesis of which some deserve a special acknowledgement in this
section.
First of all I would like to thank my supervisor from Nedap N.V.; Paul Bolwerk, your help and support
in achieving the research results are much appreciated. Also Hannie, Martin and Tonnie have to be
thanked for sharing their impressive knowledge of the UV products and their supplied market.
Furthermore, special thanks to Nedap’s consultant Jacob Schermers, who have been of great help by
sharing his operational excellence knowledge and experiences. At last I would like to thank Jeroen
Somsen for providing me the opportunity to gain all the practical experiences at Nedap, and for his
inspiring vision on improvement processes.
The contribution of the University of Twente has been significant on this research as well. For that
contribution I would like to thank my supervisors, Leo van der Wegen and Waling Bandsma. Their
interest, guidance, constructive feedback and criticism regarding this thesis have been very valuable
to the quality of this thesis.
Finally, I would like to thank my family and friends for their unconditional support during my studies.
Your patience, support and encouragement have been of great help for successfully ending my
studies.

Henri Arkink
July 2013

© H.J.F. Arkink (2013) III
© H.J.F. Arkink (2013) IV
Abstract

This research is introduced to align the order fulfilment process at Nedap UV with the product and
market characteristics of the products involved. Nedap UV manages the supply of UV drivers to
customers and is the product group of Nedap this research is focussing on. In the UV product group
delivery and workload problems arose frequently due to an ineffective, inefficient and uncontrolled
order fulfilment process. Order fulfilment is interpreted in this research as the complex process
composed of several activities undertaken by different functional entities, starting with planning the
future orders up to delivering the customer orders at the right time and right place. To achieve the
research goal, a more effective, efficient and controllable order fulfilment process, we stated the
research problem as: “How to align the tactical order fulfilment process to the product and market
characteristics of Nedap UV?” Tactical decision making based on procedures, rules and control
systems is what is missing at Nedap UV to make the order fulfilment process operate effective and
efficient. The tactical decision level has been overlooked as the high workload for the operational
manager resulted in a lack of attention to structural problem solving. Analysis towards this tactical
level of order fulfilment at Nedap UV revealed a lack of cooperation and alignment of internal order
fulfilment processes. We solved this business process problem guided by the improvement
framework of Rohleder and Silver (1997).
The focus of this research is set to three essential tactical order fulfilment processes, all controlled by
Nedap UV. The remaining processes were not in control of Nedap UV or not significantly influencing
the order fulfilment process performance. These three processes comprise the sales planning, service
and inventory management and the supply planning. These processes were researched in
combination with the UV product range to obtain a complete understanding of the current situation.
Hereafter, we constructed a guide for aligning the three processes with the UV products’ product and
market characteristics. The alignment process needs to be initiated for all product types individually
as the alignment process is depending on the specific product and market characteristics of the
products. To provide more understanding and clearance of the alignment process we introduced a
set of pilot implementations according to the constructed process alignment guide. The selection of
these processes is based on multi criteria analysis of three characteristics of the product groups.
These characteristics influence the need for an aligned process per product and are the demand
variability, the growth potential and the importance of the product group. Scoring these
characteristics for the three product groups made us conclude that Product Group 1 and Product
Group 3 are the most interesting pilot product groups to start a pilot alignment process for.
The research structure presented above resulted in an aligned order fulfilment process in which
introduced rules and procedures provide structure to the processes involved. Results could not
exactly be valued as performance was not measured formerly. However, for the selected pilot
product groups we have proven that Nedap is able to improve their service conditions significantly in
combination with a decreased inventory level. An example of these results is presented here for
Product Type C. Aligning the processes for this product group resulted in a reduced safety stock level
of 25%. But most important, 88% of the Nedap UV products are supplied within one instead of eight
weeks in the aligned process. Concluding, aligning the order fulfilment for this product type results in
less inventory costs while service conditions are improved significantly for 88% of the orders.
© H.J.F. Arkink (2013) V
The process alignment was based on a targeted service level of 97.5% of the products supplied
before the agreed delivery date. This service level is not monitored so far, however, employees
involved assume this service level not to be attained structurally before. These findings suggest that
the order fulfilment process alignment will result in significantly improved service conditions while
Nedap UV requires fewer resources. Besides these effects on the customer satisfaction, the aligned
order fulfilment process will have a significant effect on the workload problem as well. We expect the
average effort to fulfil an order to decrease significantly because of the formalisation of the process.
Formalisation of processes increases the standardisation of them which leads to clarified tasks and
clear responsibilities for the employees. Apart from that, orders are fulfilled in a smaller time frame.
While these orders are completed earlier, customer complaints or order modifications will appear
less frequently. We expect all of this to lead to more efficient and effective fulfilment of orders, with
a decreased amount of delivery and workload problems.
To increase the targeted controllability of the processes we suggested Nedap UV to introduce a
performance management system. This system should expose the performances of the processes by
measuring several key performance indicators. We introduced a set of performance indicators for
this performance management system which measure the sales planning reliability and the stock and
delivery performance. These performance indicators are:
o (1.1) Nedap 12-month sales planning versus actual sales per product type
o (2.1) On-hand stock level per product type
o (2.2) Stock turnaround time per product type
o (2.3) Total inventory value UV in Euro’s
o (3.1) Percentage of products delivered on time per product type
o (3.2) Lateness per supplied product in days
The performance management system with these performance indicators should aim for a
continuous improving process of order fulfilment. This continuous improvement should be attained
by learning from and acting on appeared problems and deviations from set targets. After designing a
performance management system Nedap UV should implement the order fulfilment process for its
complete product range.

© H.J.F. Arkink (2013) VI
Table of Contents

Colophon II
Acknowledgements III
Abstract V
Table of Contents VII
List of Terms and Abbreviations X
List of Figures XI
List of Tables XII
1. Introduction - 1 -
1.1 Introduction to Nedap N.V. - 1 -
1.2 Problem Statement - 2 -
1.3 Research Objective and Deliverables - 3 -
1.4 Research Approach - 4 -
1.5 Research Restrictions - 7 -
2. Theoretical Framework - 9 -
2.1 The Order Fulfilment Process - 9 -
2.1.1 Order Fulfilment - 9 -
2.1.2 Tactical Order Fulfilment Processes - 10 -
2.2 Product and Market Characteristics - 13 -
2.2.1 Product and Market Characteristics in General - 13 -
2.2.2 The Product Life Cycle - 13 -
2.2.3 The Customer Order Decoupling Point (CODP) - 14 -
2.3 Performance Measurement - 16 -
2.4 Summary of the Theoretical Framework - 17 -
3. Order Fulfilment at Nedap UV - 19 -
3.1 Nedap UV Order Fulfilment Process - 19 -
3.1.1 Order Fulfilment Process Map - 19 -
3.1.2 Nedap UV Order Fulfilment Process Description - 21 -
3.1.3 Order Fulfilment Process on the Tactical Level - 22 -
3.2 Nedap UV Product and Market Range - 24 -
3.2.1 Strategic Vision on Products and Markets - 24 -
3.2.2 Nedap UV Product Assortment - 25 -
© H.J.F. Arkink (2013) VII
3.2.3 Characteristics Influencing the Order Fulfilment Process - 26 -
3.2.4 Pilot Product Group Selection - 30 -
3.3 Conclusion - 35 -
4. Aligning the Order Fulfilment Process - 37 -
4.1 Alignment of the Sales Planning Process - 37 -
4.1.1 Input from Historical Demand Data - 38 -
4.1.2 Input from the Customer - 40 -
4.1.3 Input from the Nedap UV Employees - 41 -
4.2 Alignment of the Service and Inventory Management Process - 42 -
4.2.1 Alignment of the Service Management Process - 42 -
4.2.2 Alignment of the Inventory Management Process - 44 -
4.3 Alignment of the Supply Planning Process - 47 -
4.4 Summary and Conclusions - 48 -
5. Implementation of the Order Fulfilment Process Alignment - 49 -
5.1 Process Alignment for Product Type A and B - 50 -
5.1.1 Aligning the Sales Planning Process - 50 -
5.1.2 Aligning the Inventory and Service Management Process - 51 -
5.1.3 Aligning the Supply Planning Process - 52 -
5.2 Process Alignment for Product Type C - 52 -
5.2.1 Aligning the Sales Planning Process - 52 -
5.2.2 Aligning the Service and Inventory Management Process - 55 -
5.2.3 Aligning the Supply Planning Process - 57 -
5.3 Process Alignment for Product Type E - 58 -
5.3.1 Aligning the Sales Planning Process - 58 -
5.3.2 Aligning the Service and Inventory Management Process - 61 -
5.3.3 Aligning the Supply Planning Process - 61 -
5.4 Conclusions and Results - 62 -
6. Order Fulfilment Process Performance Indicators - 65 -
6.1 Sales Planning Performance - 66 -
6.2 Inventory Performance - 67 -
6.3 Delivery Performance - 67 -
6.4 Performance Measurement Discussion - 68 -
7. Conclusions and Recommendations - 71 -
7.1 Conclusions - 71 -
© H.J.F. Arkink (2013) VIII
7.2 Recommendations - 73 -
Bibliography - 75 -
Appendices - 79 -
Appendix A: Nedap Business Units - 79 -
Appendix B: Light Controls Product Group Structure - 81 -
Appendix C: Project Team Organisational Chart - 82 -
Appendix D: Literature Research Method - 83 -
Appendix E: Empirical Research Method - 84 -
Appendix I: Smoothing Constants of the Winters Procedure - 85 -
Appendix J: Normal Probability Distribution Table - 86 -
Appendix L: Order Fulfilment Process Alignment of Product Group 3 - 87 -
L.1 Process Alignment for Product Type D and G - 87 -
L.2 Process Alignment for Product Type F - 94 -

© H.J.F. Arkink (2013) IX
List of Terms and Abbreviations

 ATO Assemble-To-Order
 AVI Automatic Vehicle Identification business unit
 BPM Business Process Mapping
 BWM Ballast Water Management convention
 Ch. Chapter
 CODP Customer Order Decoupling Point
 Conf. Confidential
 Curing The drying process of a wide range of products in digital printing/coating and
painting applications
 CV Coefficient of Variation
 Effectiveness The extend of efforts or expenses actually contributing to the realisation of
set goals
 Efficiency The extend of processes using a small amount of resources compared to
standards
 EP Explosion Proof product group
 ETO Engineer-To-Order
 HID High Intensity Discharge lamp
 Lamp Driver Intelligent ballast to power and operate lamps
 LC Light Controls business unit
 MPSM Managerial Problem Solving Method
 MSE Mean Square Error
 MTO Make-To-Order
 MTS Make-To-Stock
 Nedap Nederlandse Apparatenfabriek
 PLC Product Life Cycle
 PCB Printed Circuit Board
 QL Induction Lighting product group
 R Review period
 R&D Research and Development
 R&I Retail & Industry product group
 S Order-up-to-level
 s Reorder point
 SCM Supply Chain Management
 SKU Stock Keeping Unit: item of stock that is completely specified as to function,
style, size, colour and location.
 UV Ultra Violet product group

© H.J.F. Arkink (2013) X